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'Pay As You Drive' Insurance

September 2, 2008, 1pm PDT

'Pay as you drive' insurance will soon be a reality in California, surviving the state senate as a voluntary program that environmental groups say will encourage people to drive less by saving them money on their car insurance.

"The program, dubbed "pay as you drive" in which drivers document their mileage and pay accordingly, will encourage motorists to drive less, saving fuel and reducing carbon emissions, environmental groups said. In doing so, they also would lower their insurance premiums."

The legislation, AB 2800 (Huffman), was amended earlier this month to drop a controversial clause of tracking miles through a global positioning device. The original bill drew criticism from Consumer Watchdog, a Santa Monica-based nonprofit, which said the practice would constitute an invasion of privacy. While the legislation died, the proposal will go forward with a plan from Insurance Commissioner Steve Poizner. Consumer groups feared privacy invasion from tracking devices, so mileage will be verified from odometer readings, not GPS.The regulations will be voluntary and are expected to take effect by fall 2009.

While insurance companies already take mileage into account when setting rates, pay-as-you-drive links premiums more closely with the actual number of miles driven. Under the new regulations, consumers could verify mileage by odometer readings, repair records or a technological device used to collect mileage data. Poizner made it clear, however, that insurance companies could not require tracking software."

From Insurance Commissioner's Press Release:
"The Environmental Defense Fund estimates that if 30% of Californians participate in this voluntary coverage, California could avoid 55 million tons of CO2 between 2009 and 2020, which is the equivalent of taking 10 million cars off the road."